How Pandemics Affect International Investment: Evidence From M&As During SARS‐CoV‐1 in China

We evaluate the impact of the 2003 SARS‐CoV‐1 epidemic on inbound cross‐border M&As in China. Provinces that experienced high levels of SARS infection rates also suffered a significant decline in cross‐border M&A activity, both in terms of the number of transactions and the overall dollar volume. The negative impact is entirely driven by a decline in deals for non‐state‐owned targets. The large, negative effect was short‐lived, and it largely dissipated by 2005, but deals lost during the epidemic were not recouped. The negative impacts were larger and longer lasting for provinces whose neighbours were not affected much by SARS, suggesting that good substitutes in nearby unaffected provinces exacerbated the negative effects in areas deeply affected by SARS‐CoV‐1.